The National Accountability Bureau (NAB) has launched a probe into $1.6 billion Lahore Orange Line Metro project and is questioning Rs20 billion worth of tax exemptions and rationale behind including the scheme in the China-Pakistan Economic Corridor (CPEC) framework.
The Rawalpindi bureau of the anti-corruption watchdog has been verifying a complaint against the project, showed official documents.
It is the third mega infrastructure CPEC project, which has come under scrutiny of NAB after Thakot-Havelian and Multan Sukkur motorway projects.
“This bureau is processing a complaint against officers, officials of Punjab Mass Transit Authority and others regarding tax exemptions of Rs20 billion for equipment of Orange Line Train Project,” according to a letter that NAB sent to the secretary of planning ministry in March this year.
Sources in the Federal Board of Revenue (FBR) told The Express Tribune that NAB had also sought details from the board in May last year. This suggests that NAB has been in the process of complaint verification for the last at least one year.
NAB sought information from the Ministry of Planning and Development under Section 27 of the National Accountability Ordinance.
CPEC came to a grinding halt after the Pakistan Tehreek-e-Insaf government came to power. The infrastructure schemes that should have been completed by 2018 as per the agreed schedule are still incomplete.
No project has begun under the second phase of CPEC and Chinese nationals are complaining about delaying their work visas by Pakistan.
NAB was probing the mechanism that had been adopted to include a provincial project into the CPEC framework, particularly when the government of Punjab had already floated a tender in January 2014 for its execution, much before CPEC deals.
The anti-corruption watchdog has also sought details of the cabinet approval for including the project in the CPEC framework. It has also asked for a copy of the Framework Agreement signed by “the then chief minister Punjab and NDRC, government of China”.
NAB spokesman Nawazish Asim said, “No CV (complaint verification) is under process in NAB Lahore regarding Rs20 billion income tax exemptions in case of Orange Line Metro project, Lahore.” He said that as far as NAB Rawalpindi was concerned, the query will be sent on Tuesday for a reply.
In January 2017, the federal government had approved Rs20 billion in tax exemptions for Punjab government’s pet project. The Economic Coordination Committee (ECC) of the cabinet had taken the decision on a summary of the Ministry of Planning and Development.
In order to give the provincial project a national colour, the ECC had decided that four mass transit projects, one in each provincial capital, would also be eligible for similar tax exemptions.
Besides the Lahore Orange Line Metro Project, Karachi Circular Railway, Greater Peshawar Region Mass Transit System and Quetta Mass Transit System were declared eligible for similar tax exemptions. However, except for Orange Line, no provincial project could reach the approval stage during past over four years.
The ECC had granted exemptions from withholding tax beyond 6% of the E&M contract price, and from taxes, duties on import of equipment that were installed for the Lahore Orange Line Metro Train Project. The project, inaugurated in October last year, has a 27.1-km long dedicated signal free corridor for mass transit system in Lahore. The corridor is capable of accommodating trains running both ways with a capacity of 30,000 passengers per hour.
The Executive Committee of National Economic Council (Ecnec) had approved the project at a cost of Rs165.22 billion in May 2015 including a foreign loan of Rs103.1 billion.
According to the terms of the commercial agreement signed between the government of Punjab and CR-NORINCO joint venture, the contractor paid 6% withholding income tax. The government of Punjab was supposed to pick the differential cost but this was transferred to the federal government.
Under clause 27.1 of the agreement, complete exemptions were given to the contractors from payments of customs, import duties and taxes. The planning ministry noted that at the time of award of the contract the withholding rate was 6%. Later on, the FBR increased the rate to 7% for those contractors who file income tax returns and 12% for non-filers.
Published in The Express Tribune, May 4th, 2021.